Industries

OTTAWA—Falling oil prices took a bite out of exports in October as Canada’s merchandise trade deficit increased to roughly $1.2 billion in October compared with $891 million in September, Statistics Canada said Thursday.

Economists had expected a deficit of $700 million, according to Thomson Reuters Eikon.

“October’s surprise disappointment in the trade deficit adds to weakness from the prior month but the details reveal that momentum beneath the surface is somewhat stronger,” CIBC economist Katherine Judge wrote in a report.

In volume terms, exports increased 1.2 per cent as lower energy prices led to a 2.3 per cent drop in total export prices. Real imports were essentially unchanged.

Judge noted the increase in export volumes was a positive indicator for manufacturing shipments and monthly GDP.

“Following a discouraging end to Q3 in terms of growth, as well as headwinds being faced in other parts of the economy including the energy sector, this report is a step in the right direction,” Judge wrote.

“However, the Bank of Canada will need more consistently positive data in order to raise rates at its January meeting.”

The Bank of Canada kept its key interest rate target on hold this week amid the drop in oil prices and an unexpected decline in business investment.

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